From reducing inheritance tax to donating family companies: what is the new Flemish government changing about the tax ‘game rules’?

With the arrival of the new Flemish Government, among other things, the cards of inheritance tax, donation and registration duties are being reshuffled, with some notable changes in play. We outline the most important changes below.

Reduction of inheritance tax

The Flemish coalition agreement provides for an inheritance tax reform that will lower taxrates for all heirs. This reduction will be phased, with a first step in 2026 and the full reform scheduled for 2029.

The tax-free allowance for movable property inherited by the surviving partner is also increased from 50 000 EUR to 150 000 EUR.

There will also be a tax-free allowance for single individuals without children.

Extension of the suspect period of donations

Donations of movable property do not require mandatory registration. In case of non-registration, no donation tax is due either. However, a so-called ‘suspect period’ applies in such cases. This implies that if the donor dies within a period of three years, the donee is taxed in the (often higher) inheritance tax. The Flemish government now wants to extend this suspect period from 3 to 5 years.

Please note that this change only applies to unregistered donations made on or after 1 January 2025.

Registration tax reduction

The Flemish Government has also  announced a reduction in  registration duties for the purchase of a primary private residence. The existing preferential regime, under which registration duties are 3% instead of the standard rate of 12%, will be further reduced to 2%.

Furthermore, the rate for professional sellers purchasing real estate will increase from 4% to 6%.

These changes will take effect on 1 January 2025, based on  the date of execution of the authentic deed.

Family companies

There is currently a donation tax exemption for transfers of family partnerships. Under strict conditions, this also allows real estate intended for private use and held within such a company  to be donated at a favourable tax rate. This situation has long been a point of contention of the Flemish government, which therefore wishes to exclude such real estate from the favourable regime

Other changes

Also, the 20% tax reduction for service vouchers will be abolished from 1 January 2025.

Electric cars will also be affected. The exemption from road tax and the tax on entry into service will be abolished. From 2025, new electric cars will have to pay 50% of the road tax. Then in 2026, the full rate will apply.

Conclusion

The changes announced by the Flemish Government in the areas of inheritance tax, donation tax and registration duties, among others, entail important adjustments that make it wise to reconsider your tax planning in time.

Evert Moonen and Sesil Velieva
De Langhe Attorneys